NCPA - National Center for Policy Analysis

How to Cut $343 Billion from the Federal Budget

November 2, 2010

Federal spending is on an unsustainable path that risks disaster for America, says Brian Riedl, the Grover M. Hermann Research Fellow in Federal Budgetary Affairs in the Thomas A. Roe Institute for Economic Policy Studies at the Heritage Foundation.  

  • Runaway spending has increased annual federal budget deficits to unprecedented levels, adding $2.7 trillion to the national debt in the past two years alone, including a record $1.4 trillion deficit for fiscal year (FY) 2009 and a $1.3 trillion deficit for FY 2010.
  • If Congress does nothing and simply continues existing taxing and spending policies, federal deficits will grow, reaching a projected $2 trillion deficit in just 10 years -- and even that assumes a return to peace and prosperity.

Soaring spending drives these dangerous deficits.

  • By 2020, federal spending is set to soar to 26 percent of the gross domestic product (GDP), after having averaged 20 percent after World War II.
  • Revenues will likely return to their post-World War II average of 18 percent of GDP by 2020, even if the 2001 and 2003 tax cuts are made permanent.

Available spending cuts for the new Congress total up to $343 billion. Many of the cuts fall into six areas:

  • Empowering state and local governments.
  • Consolidating duplicative programs.
  • Privatization -- many current government functions could be performed more efficiently by the private sector.
  • Targeting programs more precisely.
  • Eliminating outdated and ineffective programs.
  • Eliminating waste, fraud and abuse.

Implementing the $343 billion in recommended cuts would reduce the deficit by somewhat less than $343 billion because some recommendations would also reduce tax revenues, says Riedl.

Governing involves difficult choices, and Congress simply cannot continue to court long-term disaster for all merely to avoid short-term difficulties for some.

Source: Brian Riedl, "How to Cut $343 Billion from the Federal Budget," Heritage Foundation, October 28, 2010.


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